PLAN OF COMPLETE LIQUIDATION OF FOOTSTAR, INC.Liquidation Agreement |
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Exhibit
2.1
PLAN OF
COMPLETE LIQUIDATION
OF
FOOTSTAR, INC.
This Plan
of Complete Liquidation (the “Plan”) is intended to accomplish a complete
liquidation of Footstar, Inc., a Delaware corporation (the “Company”), in
a manner that satisfies Section 331 of the Internal Revenue Code of
1986, as amended (the “Code”), as follows:
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1.
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Scope of
Plan. The Plan provides for the complete liquidation of
the Company by providing for a series of distributions of cash to the
stockholders of the Company (the “Stockholders”) generated from cash on
hand, the sale of certain assets and the wind-down of the Company’s
business as described in the Plan, including the submission of a plan of
dissolution to the Company’s Stockholders in 2009 after expiration of the
Company’s agreement with Kmart to exclusively operate the footwear
departments in all Kmart stores through the end of December, 2008 (the
“Kmart Agreement”).
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2.
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Adoption of Plan by the Board
of Directors. The Board of Directors of the Company (the
“Board”) intends to adopt the Plan at a regular or special meeting of the
Board or pursuant to a unanimous written consent. The Plan
shall constitute the adopted Plan of the Company on the date on which the
Plan is formally adopted by the Board at such a meeting or pursuant to
unanimous written consent (the “Adoption
Date”).
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3.
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Liquidation of the Company’s
Business. As part of its emergence from bankruptcy in
February 2006, substantially all of the Company’s business operations were
related to the Kmart Agreement. At the end of such term the Kmart
Agreement provided for the purchase by Kmart of the
remaining inventory in the Kmart footwear departments at which
time the Company would be forced to liquidate unless it identified,
developed or implemented a viable business alternative to offset its Kmart
business. Following its emergence from bankruptcy, the
Company’s Board of Directors (the “Board”), with the assistance of
investment bankers, evaluated a number of possible alternatives to enhance
shareholder value, including acquisition opportunities, changes in the
terms of the Company’s principal contracts, including the early
termination of or extension of the Kmart Agreement, the payment of one or
more dividends, and the sale of our assets or stock. As
of early 2007, the Board determined the best course of action was to
operate under the Kmart Agreement through its expiration in December 2008,
unless earlier terminated. In March 2007, the Company engaged a
real estate broker in order to sell its headquarters
building.
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In 2008,
Kmart and the Company entered into discussions with respect to the termination
of the Kmart Agreement and the sale of certain intellectual property to
Kmart. As a result of such discussions on April 3, 2008 the Company
sold such intellectual property to Kmart affiliates for approximately $13
million, and reached an agreement on how inventory would be valued upon
termination of the Kmart Agreement at the end of 2008.
